Decentralized Identity as a Meta-platform:

How Cooperation Beats Aggregation

a white paper from Rebooting the Web of Trust IX

by Michael Shea, Samuel M. Smith Ph.D., and Carsten Stöcker Ph.D.

with Juan Caballero Ph.D. (Editor) and Matt G. Condon

github: https://github.com/SmithSamuelM/rwot9-prague.git

ABSTRACT

A meta-platform is a platform that enables and fosters participant-controlled value transfer across and among

other platforms and participants [1]; because platforms are a type of network, a meta-platform enables a network

of network efects. This cooperation among platforms may be advantageous in comparison to centralized power

(non-cooperation) in some contexts, particularly where a new network scaling law for meta-platforms can be

argued to apply directly [1][2]. An open, interoperable, portable, decentralized identity framework is a prime

candidate for becoming such a meta-platform and for leveraging this aggregate network efect.

Signifcant momentum has been developing behind a universal decentralized identity system based on open

standards, including the W3C-supported decentralized identifer (DID) and verifable credential (VC) standards

[14][21]. Associated industry groups supporting this open standard include the Decentralized Identity Foundation

(DIF), the Sovrin Foundation, and the HyperLedger Foundation projects Indy, Aries, and Ursa [15][16][18][19][20].

The purpose of this paper is to foster awareness of the economic benefts of cooperation and the crucial role

decentralized identity may play in unleashing new sources of value creation and transfer among cooperating

platforms.

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INTRODUCTION

We are all familiar with many of the existing software platforms that are used today: in a consumer context, we

speak of Google for searching, Amazon for purchasing goods, and Facebook or Twitter for social media exchanges.

In an enterprise/business context, the platforms are diferent: Salesforce for CRM, TradeLens for containerized

shipping and logistics, and Amazon AWS for cloud-based IT services. In economics terminology, we could state

generally that the progressive reduction that a platform ofers its operators in transactions costs is what drives the

growth of that platform. These transaction costs include triangulation, transfer, and trust [5]. For example, these

costs include those incurred in matching buyers to sellers and in facilitating interactions or executing payments.

This progressively lower per-transaction overhead accrues not just proftability but also other forms of value to

the platform itself via Metcalfe's law of network efects. Buyers and sellers on a platform get a signifcant

reduction in transaction costs as well, from their point of view. The platform owners typically levy a fee on each

transaction, as well as gaining market-wide access to large amounts of transaction data.

To date, in order to maximize network-efect-driven value, the "platform game" has been defned by a "winner

takes all" rule book. The solitary focus of the platforms has been to grow the network as large as possible as

quickly as possible. In a "winner takes all" world, this is the only road to survival. And the winners are few and

powerful, and typically highly centralized, so they are therefore readily able to exploit their participants. Oddly,

as the world has become dominated by a few powerful centralized platforms, entire industries have grown

suspicious of this value proposition, and hence trust has diminished in would-be platforms and maneuvers to

become one.

We are no longer in a centralized world.

With a proper meta-platform counterbalancing these centralizing tendencies, a "winner takes all" approach is no

longer the only, or even, perhaps, the most sustainable model for establishing platforms. This paper examines one

blockchain-enabled technology and market driver for decentralization: an identity meta-platform. It describes how

identity can provide the connective pathways (in software terms, the "protocol") that unlocks the potent force of

data-fow decentralization and provides the foundation for the creation of a platform-of-platforms (what we will

call a "meta-platform") that provides its participants with a new level of control and portability. By making their

participation portable to other platforms structured around the same protocol, these platforms empower the

individual actor vis-a-vis the platform.

We will frst discuss how the network scaling law for meta-platforms difers from the network scaling law

traditionally seen on platforms today, and we will examine how the cooperating members of a decentralized

identity meta-platform may out-compete traditional, centralized identity platforms (such as login in with

Google/Facebook through which end-users access other services but in the process outsource control over their

identity, data, metadata, and online relationships)[1].

Not only do macro-level advantages emerge for the cooperating platforms themselves, but it is also hard to

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overstate the micro-level impact that decentralization of identity infrastructure can have for the individual

consumer, who increasingly is hungry for ways to take back control.

We will outline how participant control means that participants may form customized or bespoke virtual

platforms of their own choosing. These virtual platforms could aggregate and/or amplify their identity's value

across multiple platforms. Participant control better balances the interests of participants and platform operators.

It provides a check on exploitation while increasing the value of the platform to both participants and operators

due to increased attractiveness and cooperation [7][13]. Key points of this analysis at the participant/consumer

level are outlined by this diagram:

After this analysis, we will then return to the macro- and industry level to overview some concrete examples of

industry ecosystems where this kind of identity meta-platform could address existing interoperability problems

and provide real value, today.

We will close with a summary of what has been presented, and make the closing argument that by establishing

identity functions on a decentralized meta-platform protocol, many other technological and economic processes

can develop powerful resistance against the technological tendencies that have "centralized" data power into so

few hands over the last two decades.

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SIDEBAR: THE COOPERATIVE NETWORK OF NETWORKS EFFECT

A network "scaling law" describes how some properties of a network change as a function of the size of the

network. In the case of platform networks, the relevant property is network value, and the size is measured by the

number of participants. The most well-known network scaling law is Metcalfe's Law [11], according to which the

value of the network to a single participant is proportional to the total number of participants. If we let a

represent the average proportionality constant and N the number of participants then we have the following

expression for the average value of a network to a participant, v, that is,

v = a × N

Furthermore the total value of the network, V, is just the sum of the values from each of the N participants. This

gives the following expression:

V = v × N = a × N × N = a × N²

Any property or trait of the network that scales by the square of the size of the network greatly amplifes even

minor advantages accruing to relative size. This naturally creates a "race to scale" between competitors in any

market that highly values such a network trait. For this reason, the software industry values "network efects"

highly, often applying the term anywhere Metcalfe's Law applies, even with major caveats, in calculations of

valuation or market position. (For a discussion of the quantitative validation of this efect, See Smith, 2019[1]).

Metcalfe's scaling law of cooperative networks

The exponential increase in value described by Metcalfe's law poses the question: What happens if two competing

networks cooperate so that the combined network has a larger N than either network on its own? To put it

another way, can cooperation between two networks be as valuable as mergers or acquisitions between them?

Suppose that two networks of size N1 and N2 respectively were to combine by making their services interoperable

(or ideally going further: cooperating and actively minimizing friction across the two networks). Individually, the

N1 network's total value is,

V1 = a × N1²,

and the N2 network's total value is

V2 = a × N2².

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After combining, the average value to a participant of either network N1 or N2 is due to the combined size of the

new network, N1+N2. This becomes,

v1 = v2 = a × (N1 + N2).

The total value of network N1 becomes,

V1 = a × N1 × (N1 + N2) = a × N1² + a × N1 × N2.

Likewise the total value of network N2 becomes,

V2 = a × N2 × (N1 + N2) = a × N2² + a × N1 × N2.

We can thus imagine network-based business contexts where, merely by cooperating, each of the two networks has

increased its total value by

a × N1 × N2.

This is a very valuable beneft of cooperation. The total value of the combined network is just the sum,

V = V1 + V2 = a × N1² + 2 × a × N1 × N2 + a × N2² = a × (N1 + N2)²,

which is the same as one larger network of size (N1+N2). The two networks can be of any size relative to each

other. Suppose for example that N2 is twice the size of N1 The following diagram shows graphically the increased

value due to cooperation, at this level of abstraction:

The same analysis can be extended to multiple cooperating

networks [1]. In the above example, the cooperative efect came

from making the networks interoperable. This may (and

traditionally does) pose a problem if both network's products are

competitive. We discuss in detail elsewhere the lifetime value of

cooperation for competing network products[1], but in broad strokes

we could say it is a function of relative network size and degree of

market saturation.

Cooperation in the calculus of business strategy

Despite the cooperative increase in total value, there may still be an

aversion to cooperation due to the competitive nature of the

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products or other counterveiling tendencies such as culture or momentum. Economic "brute force" may still win

out in many real-world contexts, where eliminating the risk of later antagonisms or conficts or other benefts

unrelated to network efects outweigh the costs and risks entailed by acquiring, eliminating, or predatorily

subordinating a competitor. But all other things being equal, cooperation might present most of the benefts of

expansion with none of the costs or risks, when connecting two networks has more net gains than net losses. Most

economics of cooperation and sustainable competition (including between nations and industries, not just

corporations and markets) require an accounting for scale that is not reductive and unidirectional, but which

includes incentives to stay small and disincentives (like bad public relations or regulatory consequences) to

overambitious mergers. For instance, in a situation where each network's governance and maintenance are

optimally manageable and efcient at a given size, yet both accrue all the benefts of expanding just by freely

networking their domains, the latter is a natural choice.

This "free" (and low-friction) value transfer across networks within the same context is what is normally

considered when using the term 'cooperation'. By 'context' we mean similar types of products and services. We

call 'intra-contextual' this cooperation that results in intra-contextual value transfer between networks. Our goal

should be the nurturing of these kinds of contexts, where data fow and interoperability can be maximized while

still preserving the necessary privacy and rights of all players.

The focus of this paper, however, is to address the question: What about cooperating networks where participants

are "free" to transfer value between networks from diferent contexts? To be more explicit, what about networks

that provide diferent, non-interoperable products and services? This is what we call inter-contextual (or more

easily pronounced trans-contextual) network value transfer. Trans-contextual value transfer, when possible, has

the potential to remove barriers to cooperation among perceived competitors. One might well pose the question, is

trans-contextual value transfer even possible? And if so, to what extent can that value transfer be called "free"?

Emphasizing this categorical distinction (intra- vs inter-contextual) and accounting wholistically for the costs of

overcoming non-interoperability in strategic planning might make a pivot toward more cooperative tactics more

feasible in the short-term.

In the next section, we will address these value transfers that may occur between contexts and context-specifc

products in terms of an analysis of benefts and costs for a business.

ACCOUNTING FOR TRUST IN CURRENT AND FUTURE SYSTEMS

A common approach to understanding business processes is via the model of transaction costs [5]. In this

tradition, business value is seen to come directly from reducing net transaction costs. Transaction costs may be

grouped into three classes: triangulation, transfer, and trust [4][5]. Of these, trust may be the most important,

especially for a platform or meta-platform. Without trust, platforms, as well as physical and digital value chains,

cannot develop to maturity. Trust and reputation are truly paramount to commerce as we know it; they are the

currency of brands and the building blocks of marketplaces.

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The "trust tax" stabilizing and structuring value chains today

The requisite level of trust for most commercial and business processes has been historically difcult, and costly,

to establish. Trusted suppliers are thoughtfully selected and managed, as well as monitored and certifed for

quality, reliability and consistency. Regulators demand certifcations and audits to ensure that best practices are

followed, and companies such as TÜV, Underwriters Laboratories, and Intertek conduct inspections and provide

quality certifcations. At the end of the value chain, customers purchase products because they trust the quality of

the brand, which is the key diferentiator for many companies. The diference in price between a widely known

and a lesser-known brand, or between a national brand and a more local brand, illustrates how at every point in

the chain, higher levels of trust come at a notable premium.

This premium or “trust tax” that consumers pay to trusted global brands is levied all the way upstream,

throughout the brands' supply chains to their suppliers. From the use of “confict-free” raw materials, to Six Sigma

manufacturing practices, to Independent Standards Organization (ISO) certifcations, to the validity of shipping

or purchase orders – the work of verifying all these characteristics "entity to entity" requires endless chain-letters

of paperwork, endless e-mails and phone calls, and costly site visits and audits. These cumbersome activities

reduce productivity and efciency throughout the economy, costs which are ultimately passed down to consumers.

The immense volumes of data generated by global supply chains has other efects as well. If such data were

properly mined and analyzed in a verifable way, the resulting analysis would help to establish the trustworthiness

of an entire value chain process and its resulting products. However, assembling and cleaning the requisite data

set for such an analytical process requires numerous manual interventions and the involvement of many parties

across multiple platforms. Furthermore, these kinds of audits are usually done by neutral consortia or by outside

frms whose incentives do not touch the competition in the relevant markets, either of which could feasibly

centralize data access across a market without triggering competitive defenses. Competition for control of such

consortia, or distrust of such proft-driven centralized frms, can slow down integration of such audits, which adds

yet more costs. In few cases is this kind of deep business intelligence analysis practicable.

Identity and reputation systems as trust brokerages

What makes the kind of end-to-end analytics described above so rare is that too much of the requisite data is

hoarded and guarded in siloes, without much concern for the best interest of a healthy trust market, or for that

matter any other market-wide concern. Trust is rarely studied at market scale, and relevant data sets for doing so

have been hard to amass. It is our belief that if such a bird's-eye perspective could be attained, there would be

many net benefts to empowering individual data subjects to hold and reuse more of the data on which their

reputation is calculated. Doing so would allow "credential-based" (or, to use a buzzword du jour, "data-driven")

trust among participants that has never been supported before.

But doing so requires loosening the grip most identity systems currently have on the credentials they already use

(internally) to gage and estimate the trustworthiness of their participants, i.e., to calculate "reputations" for all

2019-11-19 Decentralized Identity as Meta-platform 1.6 7

participants in their networks. The same credentials that identity systems use to do this, if handed over to the

participants, would allow them to prove their trustworthiness to other participants of their own choosing or on

other platforms. In this way, the raw material of reputation systems would take on a diferent kind of value,

circulating more widely and being reused again and again anywhere a given subject can prove the validity of those

credentials, i.e., anywhere they can prove their own identity.

Traditionally, identity and reputation are seen as interdependent functions of one system, or even as two sides of

one coin. After all, a reputation is meaningless without an underlying identity and an identity is valueless without

a credible reputation. After a few decades of increasingly centralized digital identity systems, we have come to

take it for granted that identity companies should naturally keep a close grip on reputation services which they

are especially positioned to provide for others. Indeed, the colloquial terminology can even be an impediment to

grasping this division of labor where credentials and tracking add up to valuable user analytics sold to the highest

bidder. Because identity systems typically include credentials of some form that encode reputation as data, the

software industry usually refers to credentialed identity systems simply as "identity" systems, not as "identity and

reputation" systems. When the calculation of reputations becomes primarily behavior-based rather than

credential-based, these systems are typically referred to as "reputation systems" rather than identity systems,

even though they are still dependent on an underlying identity system and its credentials.

For our purposes here, we view all of these traditional identity and reputation systems as existing on a spectrum

of trust conveyance. While making credentials more portable across organizational boundaries can incur its own

costs and complications, it has a curious network-of-networks efect whereby all parties beneft from the

conveyance of trustworthy information between trusted parties. Maximizing trust conveyance works out best for

everyone except for today's monopolists of trust.

Most importantly, a decentralized identity and reputation system enables trust to be transitive between contexts

to some degree. This additional dimension of cooperative network-of-network efects brings trust transaction costs

down generally. This "knock-on efect" can be quantifed by adding a transitivity factor to the equations above.

This transitive formulation is provided in detail in [1].

What's more, organizing trust in a conveyance-maximizing way for individual participants also allows for the trust

or credibility of all data for auditors and platforms. Situations where trust data is maximally portable enables

end-to-end (E2E) verifable audit trails along a given value chain even if it crosses many organizational

boundaries. "Maximally portable" might sound like a high bar or systemwide buy-in, but it is readily attainable

anywhere (and for as long as) all parties can be incentivized to minimally uphold data and control

interoperability.

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Imagining a trust landscape where reputation data fows more freely

A system-wide trust mechanism along these lines can be seen at work in the decentralized identifers and verifable

credentials of the sort standardized by the W3C consortium, in combination with consequently interoperable

agents, interaction protocols, and credential-storing wallets. We call this a "meta-platform," because it enables

participants to engage in trusted interactions in a wider ecosystem and maximizes intra-network value transfers.

This approach can slash the “trust tax” at every level, starting with participants agreeing to implement and follow

the existing decentralized identity standards and their future developments. This decentralized approach does not

build another aggregator platfom or another proprietary blockchain solution, but rather a participant-controlled

decentralized meta-platform. Opinions vary as to what this participant control could or likely would look like, but

some proponents of decentralization argue that bottom-up governance is easier to institute in these kinds of meta-

networks [1].

Because the primary value of a platform is to reduce transactions costs for all parties, a decentralized identity

system makes the building-blocks of reputation more portable and has the potential to signifcantly reduce

average, net, and/or aggregrate trust transaction costs in many diferent marketplaces and other industrial

contexts. This may make whole families of transactions viable that were not viable before, or create new kinds of

commerce (and perhaps even self-regulating ones). This increases the value of the associated platforms per

participant and lowers the critical platform size (see below). This further accelerates network-of-network efects.

CONCRETE EXAMPLES OF TRUST SAVINGS FROM DIFFERENT SCALES AND CONTEXTS

On-boarding costs

One early application of Metcalfe’s law in the business models of the ascendant communications industries was to

show that even large upfront network connection costs would eventually be overcome by the exponential increase

in value due to network size. The "break-even point" was the point in time where the growing network's value to

a participant overcame (due to network efects) the cost of joining the network. The size a network has reached at

this point is called the "critical network size".

We could adapt this terminology to today's platform economics by pointing out that the major upfront cost of

connecting to a platform is not the internet connection itself but the on-boarding cost of creating an account with

login credentials and provisioning electronic payment, with concomitant identity verifcation needs. Unbeknownst

to most users, this requires the participation of many companies and market-wide mechanisms (from insurance to

credit cards to underwriters to regulatory bodies to infrastructure providers), all of whose costs are baked into our

current networks of global commerce. But also baked into this system is a unifed user experience of convenience

and relative simplicity.

One of the problems with decentralized blockchain technology is that in general it has a ways left to go before it

can compete with this simple and convenient user experience. In terms of "on-boarding" a user to a new platform

2019-11-19 Decentralized Identity as Meta-platform 1.6 9

or network, many radically peer-to-peer digital networks or blockchain systems have quite high on-boarding costs.

In the case of peer-to-peer technologies, there can be a very steep learning curve and "UX defcit" relative to

increasingly convenient and intuitive commercial software. In the case of blockchain and cryptocurrencies

networks, participants have to contend with difculty in managing keys, increased regulatory friction, and a level

of complexity quite high by contemporary standards. The plethora of competing (and thus, at least to date,

largely non-cooperative) blockchain platforms only heightens the confusion. The result is that critical platform size

may be signifcantly increased, with the worrisome efect that many blockchain platforms may never reach their

critical size (or even a "break-even point" at which their scale and overhead are practical for their intended use

cases).

A decentralized identity meta-platform allows those on-boarding costs to be amortized across every platform a

participant chooses to join. This potentially lowers the critical platform size (and the break-even point) for the

participant on each of the sub-platforms. None of this directly helps to unify user experience, but perhaps on the

whole this "transitive onboarding" can ofer some incentives towards cooperation between platforms, in design

terms at least. All of this could readily accelerate network-of-network efects and overcome some of the

inefciencies created by competition.

IoT Combinatorics and the 4th Industrial Revolution

We have been speaking about a network-of-networks efect in positive terms, but from the perspective of

communications, it is also a dizzying escalation of the scale of some technical problems, in particular that of

addressability. Today, the Internet is probably best described as a network comprised of all interconnected

objects, of which the lion's share were traditionally human users and computers. When you add in the so-called

Internet of Things (IoT), the number of addressable elements is reaching the tens of billions already, with many

analyses predicting a tenfold increase within a decade.

The resulting "combinatorics" (or "matchmaking complexity") of possible connections between any given

subgroup is an impossibly large number. Yet in today’s user journeys or business environments, agents (whether

human, machine, or software) increasingly need to access, control, or transact with a diverse group of these

interconnected objects to achieve their goals in both the digital and physical worlds. This requires a

straightforward and ubiquitous method to address, verify, and connect these elements together.

There are about 30 billion devices connected to the internet already. These devices are managed by thousands

and thousands of diferent platforms. For the majority of the devices, it is quite unpredictable in which context

they will be used: changes of ownership, geography, use case, machine-to-machine interactions, and other

factors are inherently unpredictable. There are (N×(N-1))/2 possible peer-to-peer (P2P) connections among

the devices possible, i.e. O(n²). This results in ~10^21 possible connections. There are O(n³) possible

connections for connecting three systems and so forth.

At some point, this staggering network-of-networks complexity will be equally pertinent in all business verticals,

2019-11-19 Decentralized Identity as Meta-platform 1.6 10

but today it is most keenly felt in businesses dependent on supply-chain management because of the large number

of actors and multi-vendor components likely to be involved there. The main impediment is that it is cumbersome

for each agent to have innate knowledge of the wide assortment of diferent addressing nomenclatures and

protocols. At some point, it could go from impracticable to categorically impossible.

Human or object identities are stored in multiple centralized or federated systems such as a government, ERP,

IoT, or manufacturing systems. From the standpoint of cryptography-based systems of trust and/or verifcation,

each of these centralized authorities serves as its own root of trust, tightly controlling all identities' access to one

another's credentials and trust information. An object trailing along a supply chain is interacting with multiple

systems and platforms. Consequently, a new actor in any give value chain has no method to independently

validate credentials of a human or attributes of an object, except through the locally-governing central authority.

Even then, the audit trail they can access rarely extends back much further than the jurisdiction of that authority

unless data has been forwarded along in parallel to the human or object's trajectory.

Therefore, a trust verifcation system and associated interoperable meta-platform protocol, built on some kind of

universal addressing system must be utilized. To be a truly global solution, easy-to-use and still safe from

hacking, censorship, and other sovereign interference, such a meta-platform scheme must be independent from any

vendor-defned naming API or otherwise centralized namespace, yet they usually need to be one-to-one mappable

onto such APIs and namespaces.

A participant-controlled meta-platform based on decentralized identity solves the problem of addressability and

trust verifcation across participants involved in a given value chain transaction. The potential of enabling these

devices to interact across a network-of-networks is inconceivably broad in scope. It may well prove to be many

orders of magnitude broader than Facebook as an aggregator for human interactions and an enabler of new

connections and networks.

Such a platform will be of particular value for the Fourth Industrial Revolution (4IR), i.e. the fusion of

technology bridging the biological, physical, and digital spheres across industrial domains and societies. 4IR is

moving our world into one big convoluted cyber-physical system in which everything is connected with everything

else. In this digital fabric there is ubiquitous network connectivity among IoT devices and digital agents

establishing dynamically defned cooperation across interlinked digital value chains. We believe that an identity

meta-platform is a prerequisite to establish trust and cyber-physical security for dynamically defned cooperation

in the 4IR.

Secure Logistics Systems

Multiple global logistics consortia are trying to establish so-called "secure logistics systems" for verifable

shipment tracking, process automation, and verifable business transactions across multiple entities. In many

ways, this hinges on a similar problem of scale and addressability: how can all these actors across the world fnd

each other, verify each other, and share information securely and intelligibly?

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Despite the fact that global logistics companies are attempting to leverage decentralized technology, they are still

constrained by their confned partner-system/ecosystem boundaries that prevent full decentralization in their

implementations or substantial cooperation on a global scale to foster interoperable standards.

Let's assume the following scenario for verifable logistics transactions which is based on a real-world example:

• UAE logistics is using a decentralized Hyperledger implementation

• EU logistics is using a consortium-governed Ethereum Quorom system

• Nordic logistics is using Maersk/IBM's TradeLens

In this scenario, the three logistics companies have challenges to establish transactions across entities on the three

diferent platforms. A typical approach is either A.) to convince the other partners to join one's own platform or,

B.) to implement complex federation gateways between platforms. This latter, it's worth noting, adds another

player (the gateway) to the list of parties that need to be trusted, and potentially creates more transaction costs.

An identity-based meta-platform has the potential to solve this problem as it can establish trust among the

participant entities, verifability along the supply chain, and externally trustworthy business transactions:

• Credential-based trust for on-boarding a previously-unknown actor

• Verifable consent and business transactions

• Data provenance for trace-and-track along a logistics supply chain

Here, as throughout this paper, the importance of open standards (arrived at by transparent governance) is hard

to overstate. An identity meta-platform structured by such standards might well encourage and incentivize similar

standards to develop as "on-ramps" to such a system, of the kind the accelerate information-sharing elsewhere in

the international supply chains that are the economic basis of international logistics.

ON COMPETITION IN META-PLATFORM ECOSYSTEMS

A participant-owned meta-platform governed by open standards has mechanisms or "antibodies" that deter a

single entity from controlling it, creating a lock-in, or monetizing transaction data. The value transfer within the

interoperable meta-platform ecosystem is controlled by the participants. Furthermore, there is no administrator or

aggregator, at least not at the meta-platform level, that controls value and monetizes transaction margins.

As a consequence, there is no real foothold at the core of the meta-platform for a single party to monetize or

establish monopolistic control. Instead, these kind of organic, cooperation-incentivized conditions are favorable to:

• Authentic sharing economy

• Interoperability, whereby previously unknown parties can transact in a trusted way

• Economically viable nano-transactions (lower overheads and transaction costs)

• Secure, business transactions, verifable to a relatively high degree to outside parties without special

access or permissions

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One illustrative example can be seen in this projection about the mobility ecosystems of the near future:

It’s important to note how diferent this model is from current models (for example, the centralized ride-sharing

platforms of Uber and Lyft). Autonomous vehicles eliminate the cost of human drivers, while decentralized meta-

platforms eliminate the middleman that matches customers with rides, charges a transaction fee, and sets terms

and conditions.

Corporations will establish successful business models at the edge of this kind of meta-platform not by competing

on margins or efciency or proprietary IP, but by instead competing on:

• User Experience

• Algorithms and Analytics

• Implementation and Services

• Hardware and Infrastructure

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Mobility on a decentralized meta-platform may also become one of the most visible examples of a true sharing

economy. It might be more precise to call this a zero-marginal-cost economy, because the owners of everything

from homes to cars could, with less efort and risk, rent them out when they are not in use; this would naturally

drive the marginal cost of most overnight stays or trips closer and closer to zero over time. In a world so molded

by cooperative economic drivers, trust, reputation, and sustainablity become valuable and monetizable as a less

zero-sum form of capital.

At a macro level, the cooperative approach using portable and trans-contextual trust as the primary vehicle for

trans-contextual value transfer also makes the associated economic systems more resilient in the event of shocks

to sub-segments. Multiple independent but cooperating networks contribute network-efect value to each other.

This contributed value bolsters the network and smooths out the efect of a shock to a given sub-network. This is

a decentralized version of so-called "ergodic" economics [22], in that it leverages participant-controlled cooperative

network-of-network efects to reallocate or share value.

IDENTITY FOR ALL THINGS IN A CIRCULAR ECONOMY

The resilience mentioned above might seem a macroeconomic abstraction, but it is also linked to a more literal

kind of resilience: that of more sustainable economics. As humanity begins to transition to a more circular

economy, identity for manufactured things along their entire life-cycle and among all potential actors involved

comes to be of utmost importance. As alternatives to a circular economy grow more scarce, unreliable, and

progressively more expensive, circularity will rapidly pivot from abstract virtue to concrete value, and the circular

economy's data needs will similarly accrue urgency.

2019-11-19 Decentralized Identity as Meta-platform 1.6 14

A circular economy is an economic system aimed at eliminating waste and the maximally continuous use of

resources. Circular systems employ recycling, reuse remanufacturing, and refurbishment to create a closed system,

minimizing the use of resource inputs and the output of waste. This regenerative approach is in contrast to the

traditional linear economy, which has a 'take, make, dispose' model of production. As extraction and disposal

costs both climb, we will need more verbs than just "make".

Lowering trust transaction costs is a critical enabler for extending a sharing economy to lower-value transactions,

which in turn leads to more reuse and less waste. These economic drivers for more reuse, less waste, and spare

unused capacity are the drivers/enablers for moving towards more circularity throughout the economy.

To enable truly restorative and regenerative economy by design, circular systems need a digital representation

such as a "digital twin" for any given entity. The term comes originally from iterative design processes in military

and aerospace engineering, where prototypes, data models, and other kinds of information have to be

painstakingly versioned and tracked to allow more iteration, more testing, and more data modelling within a fnite

budget, particularly for precise and critical components. In the 21st century, it has come to mean various ways of

linking, bundling, or making persistent diverse forms of big and small data and metadata, particularly in a

decentralized context where that data might be generated and stored across many networks and contexts with

little persistant access to one another. Enabling this kind of global and persistent form of digital twin was a key

goal of an earlier paper worked on by some of this paper's authors, which called for the creation of a "DID for

everything" [17].

To enable circularity, this kind of persistent digital twin must be accessible by any (permissioned) actor along a

supply chain to provide verifable data provenance. This provenance needs to include legible and complete

information about materials and lifecycle that enable safe, exhaustive, and efcient recycling or refurbishing; it

needs to outlive the utility of the artefect, and in many cases even the company that manufactured it. To be a

truly "circular" artefact, its would-be recyclers and refurbishers need access to a "verifable story for every thing".

Of course, this takes place at an atomic level, and scoping the process of getting from individual things being

circular to all things being circular requires another combinatoric tour of infnitesimal potential interactions. But

along the way from frst circular things to entire circular economy, that unthinkably large transition could also be

sped along by the same infrastructure described above: a nurturing of cooperative networks efect, and a trust

framework in the form of an identity meta-platform for circular things.

The cryptographically secure digital twins provided by the meta-platform enable a systemic, algorithmic digital

fabric to orchestrate the circular system. All kinds of knock-on efects and organic marketplaces could arise from

such a regime of materials tracking, such as:

2019-11-19 Decentralized Identity as Meta-platform 1.6 15

• Everything with a Decentralized Identifer is connected to a persistent data store hosting verifable life

cycle data.

• Any random actor can independently verify the life cycle assertions of a thing, literally “its complete

story”.

• Back-to-birth traceability of manufactured things could be used (and is needed) to minimize avoidable

pollution and to design out waste from manufacturing processes while keeping materials in use as long as

possible.

• Monetization and incentivization of existing problems could begin in the short term, addressing machine

life cycle, supply chain provenance, or third party risk management through an automation of audit

processes on demand.

• Orchestration of circular systems with algorithms running on top of the digital twins for monitoring,

optimizing, and transitioning to a restorative and regenerative economy.

We believe that a connection between the meta-platform's cooperative network efects and a broader circular

economy should be explored as it could deliver new forms of value for society as a whole. It might even garner

enough immediate value for governments and huge corporations that infrastructural investments in that direction

could appeal to them today.

2019-11-19 Decentralized Identity as Meta-platform 1.6 16

CONCLUSION

In this paper we laid out some compelling economic reasons for corporations to join the cooperative meta-platform

in question and perhaps many other such meta-platforms yet to come. At frst glance, it might seem to some an

impractical upfront infrastructural investment that would run counter to the incentives of existing power

structures. Others might see such decentralization as unrealistic in a time when the biggest companies in the

world are low-overhead tech conglomerates dominating platforms that did not exist twenty years ago. But from

another perspective, this recent excess of monopolistic tendencies and winner-take-all platform plays might be a

growing pain, or a pendulum swing, after which we return to a drastically diferent mood and set of economic

norms.

Indeed, many would argue the pendulum has been swinging throughout the history of technology. Many leveling

technologies, such as communication networks, frst started as decentralized but then become more centralized

over time with the associated value capture eventually becoming concentrated into a few very large business

entities with higher rates of value extraction. This historically cyclical behavior is well-documented in The Square

and the Tower and the Master Switch [9][10]. One can argue that the internet, which started as a great leveler due

to decentralized networking, has now resulted in most of its value being concentrated in a handful of companies,

namely, Google, Apple, Facebook, Amazon, and Microsoft, each with valuations near one trillion dollars. Once

centralization occurs, innovation and value creation decrease and value extraction increases to the detriment of

the average user, according to either price or diversity metrics [13].

One way to combat such centralization is with regulation. The breakup of AT&T and the injunction against

Microsoft's predatory bundling are two largely successful examples of a regulatory approach to restoring more

decentralization. Both debatably resulted in demonstrably more innovation, lower costs, and overall greater

benefts to telecommunication users and operating system ecosystems. Regulatory approaches, however, often

come with deleterious or unpopular side-efects. Many prefer more market-driven decentralization when multiple

approaches are available. While the technology and its comcomitant economics are still largely immature,

appropriate applications of blockchain technology may enable such market drivers. The authors agree that

blockchain-anchored decentralized identity infrastructure is one such application. The transcontextual cooperative

network-of-networks efects enabled by a participant controlled identity meta-platform may provide sufcient

market force to forever break this cycle of centralization.

GLOSSARY

A. Platform - A platform is a business based on enabling value-creating interactions between external producers

and consumers. The platform provides an open, participative infrastructure for these interactions and sets

governance conditions for them.

The platform’s overarching purpose: to consummate matches among users and facilitate the exchange of goods,

services, or social currency, thereby enabling value creation for all participants.

2019-11-19 Decentralized Identity as Meta-platform 1.6 17

Platforms create value by using resources they don’t own or control, as such they can grow much faster than

traditional organizations.

(Source: Parker, Alstyne & Choudary, Platform Revolution [6])

B. Intra-context - transfer of value within the same set of applied products, services, and network of participants.

C. Inter-context - transfer of value across diferent applied products, services, and networks of participants. (aka

"transcontext")

REFERENCES

1. Smith, Samuel M., Meta-Platforms and Cooperative Network-of-Networks Efects: Why Decentralized

Platforms Will Eat Centralized Platforms. 2019/03/25 https://medium.com/selfrule/meta-platforms-and-

cooperative-network-of-networks-efects-6e61eb15c586

2. Thomson, Ben, Aggregation Theory. https://stratechery.com/aggregation-theory/

3. Cameron, Kim, The Laws of Identity.

http://www.identityblog.com/stories/2005/05/13/TheLawsOfIdentity.pdf

4. EconTalk Blog Sharing Transactions Costs and Tomorrow 3.0. http://www.econtalk.org/michael-munger-on-

sharing-transaction-costs-and-tomorrow-3-0/

5. M. C. Munger, “Tomorrow 3.0: Transaction costs and the sharing economy,” Cambridge University Press, 2018.

6. Geofrey G. Parker, Marshall W. Van Alstyne & Sangeet Paul Choudary, Platform Revolution: How Networked

Markets Are Transforming the Economy—and How to Make Them Work for You.

7. Google's paid search ads are a 'shakedown' Basecamp CEO says. https://www.cnbc.com/2019/09/04/google-

paid-search-ads-shakedown-basecamp-ceo-says.html

8. C. Anderson, “The Long Tail,” Wired, 2004/10/01 https://www.wired.com/2004/10/tail/

9. N. Ferguson, “The square and the tower: Networks and power, from the freemasons to Facebook,” Penguin

Books, 2019.

10. Wu, T. “The Master Switch: The Rise and Fall of Information Empires” Random House, 2010.

11. B. Metcalfe, “Metcalfe’s law after 40 years of ethernet,” Computer, vol. 46, no. 12, pp. 26–31, 2013

12. T. Pearson, “Markets Are Eating The World,” RibbonFarm, 2019/02/18

https://www.ribbonfarm.com/2019/02/28/markets-are-eating-the-world/

13. K. J. Erickson, “The Future Of Network Efects: Tokenization and the End of Extraction,” Medium.com,

2018/07/17 https://medium.com/public-market/the-future-of-network-efects-tokenization-and-the-end-of-

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extraction-a0f895639fb

14. “Decentralized Identifers (DIDs),” W3C Draft Community Group Report 23 August 2018, https://w3c-

ccg.github.io/did-spec/

15.Decentralized Identity Foundation (DIF) http://identity.foundation

16. “Sovrin: A Protocol and Token for Self- Sovereign Identity and Decentralized Trust,” Sovrin.org, 2018/01/01

https://sovrin.org/wp-content/uploads/2018/03/Sovrin-Protocol-and-Token-White-Paper.pdf

17. Shaun Conway, Andrew Hughes, Moses Ma, Jack Poole, Martin Riedel, Samuel M. Smith Ph.D., and Carsten

Stöcker. “A DID for Everything: Attribution, Verifcation and Provenance for Entities and Data Items,” written at

RWOT 7 but fnalized 2018/09/26. https://github.com/WebOfTrustInfo/rwot7-toronto/blob/master/fnal-

documents/A_DID_for_everything.pdf

18. HyperLedger Indy Project. https://www.hyperledger.org/projects/hyperledger-indy

19. HyperLedger Aries Project. https://www.hyperledger.org/projects/aries

20. Hyperledger Ursa Project. https://www.hyperledger.org/projects/ursa

21. W3C Verifable Credentials Data Model. https://www.w3.org/TR/vc-data-model/

22. Ergodic Economics. https://ergodicityeconomics.com/lecture-notes/

Additional Credits

Lead Author: Samuel M. Smith Ph.D.

Authors: Michael Shea and Carsten Stöcker Ph.D.

Contributors: Juan Caballero Ph.D. (Editor), and Matt G. Condon

Sample APA Citation:

Caballero, J., Condon, M., Shea, M., Smith, S., and Stöcker, C. (2019). Decentralized Identity as a Meta-

platform: How Cooperation Beats Aggregation. Rebooting the Web of Trust IX. Retrieved from

https://github.com/WebOfTrustInfo/rwot9-prague/blob/master/fnal-

documents/CooperationBeatsAggregation.pdf.

This paper is licensed under CC-BY-4.0.

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About Rebooting the Web of Trust

This paper was produced as part of the Rebooting the Web of Trust IX design workshop. On September 3rd to 6th,

2019, over 60 tech visionaries came together in Prague, The Czech Republic to talk about the future of

decentralized trust on the internet with the goal of writing at least 5 white papers and specs. This is one of them.

RWOT Board of Directors: Christopher Allen, Joe Andrieu, Kim Hamilton Dufy

Members of the Organizing Committee: Dan Burnett, Dmitri Zagidulin

Sponsors: Digital Contract Design (Gold), Protocol Labs (Silver), Digital Bazaar (Ongoing Sustaining), Jolocom

Community Sponsors: Blockchain Commons, Consensys, Learning Machine, Legendary Requirements

Workshop Credits: Christopher Allen (Founder, Co-Producer), Joe Andrieu (Co-Producer and Facilitator), and

Shannon Appelcline (Editor-in-chief).

Thanks to our other contributors and sponsors!

Thanks also to Paralelní Polis and the Institute for CryptoAnarchy in Prague.

What’s Next?

The design workshop and this paper are just starting points for Rebooting the Web of Trust. If you have any

comments, thoughts, or expansions on this paper, please post them to our GitHub issues page:

https://github.com/WebOfTrustInfo/rwot9/issues

The tenth Rebooting the Web of Trust design workshop is scheduled for early 2020. If you’d like to be involved or

would like to help sponsor the event, email:

rwot-leadership@googlegroups.com

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